The New York Commercial Financing Disclosure Law (“CFDL”) imposes consumer-style disclosure requirements for a variety of commercial financing transactions, including loans, sales-based financing, including merchant cash advances, and factoring transactions.  The original bill, SB 5470, was signed into law in December 2020 and then amended by SB 898 in February 2021.

State or federally chartered depository institutions, lenders regulated under the federal Farm Credit Act, and any lender who makes five or less commercial financing transactions in New York in a 12-month period are exempt from complying with the CDFL.

Additionally, certain transactions are exempt from compliance with the CDFL, including commercial financing transactions greater than US$2.5 million, true lease transactions, as described in UCC Article 2A, secured real property financings, and commercial financing transactions in which the recipient of the financing is an automobile dealer, vehicle rental company, or affiliate of either, and the transaction is in an amount of at least US$50,000.

The effective date of the CDFL is January 1, 2022.  The law will be applicable to commercial transactions in which the recipient is a New York citizen.

Under the CDFL, a non-exempt lender in a non-exempt commercial finance transaction will be required to make certain disclosures to the recipient at the time a specific offer of financing is extended to the recipient borrower.  The term “specific offer” means “the specific terms of a commercial financing, including price or amount, that is quoted to a recipient, based on information obtained from, or about the recipient, which, if accepted by a recipient, shall be binding on the provider, as applicable, subject to any specific requirements stated in such terms.”  These disclosures are:

  • The total amount financed, and the amount disbursed if it is different from the total amount financed;
  • The finance charge;
  • The annual percentage rate (or the estimated APR for sales-based financing and factoring transactions), calculated in accordance with the federal Truth in Lending Act and Regulation Z;
  • The total repayment amount;
  • The term (or the estimated term for sales-based financing) of the financing;
  • Periodic payment amounts;
  • Prepayment charges;
  • All other fees and charges not otherwise disclosed; and
  • Any collateral requirements or security interests.

The lender is required to obtain the recipient’s signature on all required disclosures.  Violations of the CDFL are subject to civil penalties not to exceed US$2,000 per violation or US$10,000 if the violation is deemed willful.  As of now, a violation of the CDFL will not affect the enforceability of the financing transaction.